COMMISSIONER OF INCOME TAX Vs. S.C. WADHWA

JUDGEMENT

(1.) REFERRED the following question of law for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing deduction @ 40 per cent as expenses out of incentive bonus which was disallowed by the AO in view of definition of s. 17(1)(iv) of the Act and confirmed by the Dy. CIT(A), Rohtak -

(2.) A perusal of the record shows that while working as Development Officer in services of the Life Insurance Corporation of India (for short, 'the Corporation'), the assessee had received a sum of Rs. 58,090 as incentive bonus for the financial year 1985 -86. In the return filed for the asst. yr. 1986 -87, he claimed deduction of Rs. 29,045 as expenditure incurred for earning the incentive bonus. The AO rejected the assessee's claim for deduction. The Deputy Commissioner of the AO that the incentive bonus paid by the Corporation was taxable as "salary". However, the Tribunal partly accepted the assessee's claim and declared that he was entitled to deduction to the extent of 40 per cent of the incentive bonus.

(3.) SHRI Rajesh Bindal argued that the incentive bonus paid to the assessee was a part of his salary, inasmuch as, the same had not been paid to him for meeting the expenses as a special allowance, which was necessarily and exclusively incurred by him in the performance of his duties. He relied on the judgments of this Court in B.M. Parmar vs. CIT (1998) 150 CTR (P&H) 548 : (1999) 235 ITR 679 (P&H) and K.K. Kansal vs. CIT (2004) 191 CTR (P&H) 106 : (2004) 270 ITR 375 (P&H) and also a judgment of Madhya Pradesh High Court in CIT vs. A.K. Ghosh and Ors. (2003) 184 CTR (MP) 420 : (2003) 263 ITR 536 (MP) and argued that the assessee was not entitled to any deduction from the incentive bonus paid by the Corporation.